PayPal Giving Fund: Good Intentions Don’t Ensure Good Outcomes

On February 28, 2017, PayPal, Inc. and PayPal Giving Fund were named as defendants in a class action lawsuit. The main headline the lawsuit generated is that donors who made gifts to charities and nonprofits through the PayPal Giving Fund (PPGF) had their gifts re-directed to other organizations without their consent. The complaint contains much more than that, including a very important section regarding PPGF’s violation of The Lanham Act.

The Lanham Act is a federal law that protects the intellectual property of firms, specifically to protect the names, trademarks, servicemarks, and other identifying information from use that confuses or deceives consumers about the source, affiliation, or sponsorship of a good or service. The complaint alleges that PPGF knowingly, and without consent of nearly a 1,000,000 listed charities and nonprofits, posted EIN, trademarks, brands, servicemarks, and organizational summaries on their site. That, combined with the repeated assurances on the PPGF site and communications with donors, that 100% of all gifts would be sent to the donor’s selected organizations, implies that PPGF was in partnership or agreement with all listed organizations. However, the 2015 990 of PPGF indicates that only 29,000 nonprofit organizations had a PPGF account.

Why is this important? Isn’t what PPGF did a good thing? On the face of it, they’re just providing a service that facilitates the flow of charitable contributions, some of which may never have been made otherwise, to organizations that need support. In theory, acting as a charitable intermediary is not a bad motive.

However, the assumption that PPGF’s the use of the names, trademarks, and reputations of nonprofit, without their consent, is problematic. The critical work that many nonprofits do face challenges of legitimacy, unfair competition, and access to capital. As such, their reputational capital is extremely valuable.

PPGF allowed it’s donors to believe that they were in partnership with listed organizations. When the designated nonprofits didn’t acknowledge gifts from the originating donor, PPGF facilitated the loss of the nonprofit’s reputation, brand goodwill, and trustworthiness. None of which was the fault of the nonprofits since most, according to the complaint, were unaware of being listed on the PPGF index of nonprofits.

If the contributions had been distributed as PPGF had represented the unauthorized use of hundreds of thousands of organization’s names, brands, and marks might never have made class action lawsuit headlines. There are an unknown number of gifts that never made it to the intended nonprofit recipients and an unknown number of generous donors who think that they organizations they supported don’t care about the gifts that they made. I think this case serves as a reminder to everyone in the sector – whether a donor, a charitable intermediary like PPGF, or a nonprofit – that good intentions are not enough to ensure good outcomes.